Government optimistic debt deal can be done
on 06/02/2013 22:39:38
As talks dragged on to secure agreement on cutting the cost of the nationalisation of Anglo Irish Bank, Chief Whip Paul Kehoe told politicians in Dublin that officials had worked "extremely hard".
"We are optimistic that an arrangement agreeable by all parties can be found," Mr Kehoe said.
Patrick Honohan, governor of the Central Bank of Ireland, was leading negotiations with counterparts from the European Central Bank (ECB) in Frankfurt.
It is believed the proposal is designed to see the State's existing promissory note - a high interest IOU with €28bn outstanding - replaced with several long-term government bonds.
President Michael D Higgins cut short an official visit to Rome to return to Dublin to sign legislation into law if necessary.
A spokesman for the President said Mr Higgins had left to "make himself available in the possibility of there being legislation to consider".
The board of the Irish Bank Resolution Corporation (IBRC), the rebranded Anglo, has been stood down by the Government.
Under the proposed deal, the state would make annual interest payments on the bonds - believed to run out between 30 and 40 years - and would pay the principal sum upon its expiry.
The IBRC will be liquidated as part of the deal.
Government sources claimed the new plan, if accepted by the ECB, would be "very advantageous" for Ireland.
Legislation was expected late tonight to enact the proposal and officially dissolve the former Anglo - the favoured bank of property speculators and developers in Ireland's Celtic Tiger years, and ultimately the toxic lender that almost brought the country's economy to its knees in late 2008.
The IBRC has been winding down the old loan books of Anglo for more than two years and at the same time attempting to recover debts.
It has more than 800 staff.
It is understood the Government's liquidation plan will see IBRC assets transfer to the National Asset Management Agency (Nama), set up to remove toxic loans from the country's main banks.
The Irish Government has been in long-running talks to cancel a repayment scheme of €3.1bn a year until 2023 for the so-called promissory note - a mechanism devised to refinance Anglo using money from the Central Bank of Ireland but without breaching strict European bank funding rules.
The latest instalment was due next month.
A formal decision on whether the ECB has signed off on the Irish proposal is not expected to be announced until tomorrow afternoon.
The former Government had secured a deal with European chiefs under the promissory note scheme to cover debts at Anglo to the value of more than €25bn, and subsequently also included the debts of the Irish Nationwide Building Society to the amount of €5.3bn. The IBRC is now made up of both former banks.
Around €3bn has already been paid off the total €31bn cost, leaving €28bn outstanding.
The Coalition has been battling with European leaders and officials in Brussels and Frankfurt since taking power in early 2011 to cut the cost of the country's bank bailout.
Ireland's total bank bailout cost about €64bn.
The thinking behind the proposal would be to give the Irish state more time to pay off the debt, thus reducing the cost of the principal sum - according to finance officials it is a more manageable approach, albeit with longer and potentially bigger interest repayments.
One of the major sticking points in efforts to strike a debt deal has been the ECB's reluctance to be seen to be financing individual EU member states.
It also does not want to set a precedent for granting a deal on bank debt.
Fianna Fáil said earlier that it remained sceptical of the success of any deal.
Finance spokesman Michael McGrath said if speculation is correct and the Government is to strike a deal, its success would be measured by the impact on the general public.
"People will want to see a difference in their pockets," Mr McGrath said.